Citi has introduced a blockchain-based product called Citi Token Services, which aims to provide digital asset services and enhance the bank’s real-time payment and cash management solutions. This move comes in response to the increasing demand for “always-on” capabilities and the acceleration of digitalization caused the COVID-19 pandemic.
Citi’s institutional clients can now utilize the Citi Token Services to facilitate cross-border payments, manage liquidity, and support trade finance on a 24/7 basis. By leveraging Citi’s private, Ethereum-based blockchain rails, deposits can be converted into tokens and seamlessly sent across borders and bank accounts. The service also offers trade finance optimization replacing traditional paper-based processes with smart contracts that automatically release payments when predefined conditions are met, replacing letters of credit and bank guarantees.
Ryan Rugg, the global head of digital assets in Citi’s treasury and trade division, stated that the bank plans to expand its smart contract library to further enhance trade finance capabilities. In a successful pilot test, the service enabled international shipping company Maersk to transfer tokenized deposits for instant payments to service providers, significantly reducing processing times from days to minutes.
To ensure client convenience, Citi Token Services is designed in a way that eliminates the need for clients to set up wallets or hold tokens. The bank prioritized the development of the solution based on client demand, particularly focusing on trade finance and cash management use cases. Seamless integration for clients was a key consideration during the technology’s development.
According to Timothy Massad, a former chairman of the U.S. Commodity Futures Trading Commission, blockchain technology has the potential to enhance the services offered banks, but industry players must carefully balance the risks and advantages. Tokenizing money can increase efficiency and provide easier tracking compared to traditional processes. Massad also emphasized the importance of tokenizing assets that have real value, such as stocks, bonds, and real estate.
Citi’s blockchain infrastructure for Citi Token Services can also serve as a foundation for other digital asset solutions in the future, potentially running stablecoins, cryptocurrencies, or other tokenized assets, pending regulatory approval. This ability to tokenize a wide range of assets is considered the “holy grail” industry experts.
As the conversation around stablecoins and blockchain technology gains momentum, banks like Citi are actively investing in innovative solutions to stay competitive. JPMorgan is reported to be working on a similar blockchain-based deposit and settlement tokenization service, further highlighting the growing interest in digital asset services within the banking sector.
– Victor J. Blue/Bloomberg
– Timothy Massad
– Ryan Rugg